Biden Seeks to Increase Corporate Inc Taxes to 28%

Implications of Proposed Corporate Tax Hike on Utility Bills

In the realm of fiscal policy, the corporate income tax rate is a subject of contention, with President Biden and congressional Democrats advocating for an increase to 28% from the current 21% established under the Trump administration. This proposed change has sparked concerns over the potential impact on consumer utility bills, which are closely tied to corporation tax rates.

Utility companies, which provide essential services such as electricity, gas, and water, are investor-owned entities regulated by state utility commissions. These commissions have a legal mandate to incorporate the cost of taxes into the rates charged to customers. Thus, any alteration in the corporate income tax rate directly affects the billing rates approved by these commissions.

According to Grover Norquist, president of Americans for Tax Reform (ATR), the threat of a corporate tax rate hike could exacerbate financial pressures on households already grappling with high inflation. ATR’s investigation into the relationship between corporate taxes and utility rates included a comprehensive review across all 50 states, revealing over 300 instances where tax savings were passed on to customers following the 2017 Tax Cuts and Jobs Act (TCJA).

The TCJA, which reduced the corporate tax rate from 35% to 21%, enabled utilities to offer savings to customers through various means such as rate reductions, bill credits, or mitigating planned rate increases. ATR’s documentation effort included a 90-second video compilation of local news reports highlighting the nationwide utility savings.

A report in Utility Dive, a trade publication, underscored the substantial benefits reaped by customers from the TCJA—a collective $90 billion in utility savings. These savings were a direct result of investor-owned utilities creating regulatory liability balances to refund customers, as indicated by 2017 SEC 10-K filings.

As discussions around the proposed increase in the corporate income tax rate continue, stakeholders are mindful of the potential repercussions. An increase could lead to higher utility bills for consumers, a development that would not go unnoticed by constituents and local news outlets. The nexus between corporate taxes and consumer costs remains a critical factor in this ongoing debate over tax policy.